UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): SEPTEMBER 25, 2002
BOSTON PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 1-13087 04-2473675
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
111 HUNTINGTON AVENUE, SUITE 300
BOSTON, MASSACHUSETTS 02199-7610
(Address of principal executive offices) (Zip Code)
(617) 236-3300
(Registrant's telephone number, including area code)
Boston Properties, Inc. (the "Company") hereby amends its Current
Report on Form 8-K dated September 25, 2002, filed with the Securities and
Exchange Commission on October 8, 2002, to (i) add Item 5 below to describe a
certain disposition that is individually insignificant and (ii) amend Item 7
in its entirety to include required financial statements, pro forma financial
information and certain exhibits.
ITEM 5. OTHER EVENTS
On November 22, 2002, the Company disposed of One and Two
Independence Square, two Class A office properties consisting of
approximately 900,000 square feet located in Washington, D.C. for gross
proceeds of approximately $345.0 million. The Company used the net proceeds
to repay the mortgage financing related to these properties totaling
approximately $189.1 million and to pay down other unsecured indebtedness.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements under Rule 3-14 of Regulation S-X:
Combined Statements of Revenue over Certain Operating Expenses of 399
Park Avenue for the period from January 1, 2002 through September 24,
2002 (unaudited) and for the year ended December 31, 2001.
(b) Pro Forma Financial Information:
Pro Forma Consolidated Balance Sheet as of September 30, 2002
(unaudited).
Pro Forma Consolidated Statements of Operations for the nine months
ended September 30, 2002 (unaudited) and for the year ended December
31, 2001 (unaudited).
(c) Exhibits
EXHIBIT NO.
-----------
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Purchase and Sale Agreement, dated as of August 28, 2002, by
and between Citibank, N.A. and BP 399 Park Avenue LLC. *
99.2 Credit Agreement, dated as of September 25, 2002, by and among
BPLP, BP 399 Park Avenue LLC, certain other BPLP subsidiaries,
and the banks and others that are parties thereto. *
-------------------------------
*Previously filed.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: December 4, 2002
BOSTON PROPERTIES, INC.
By: /s/ Douglas T. Linde
---------------------
Douglas T. Linde
Chief Financial Officer
Report of Independent Accountants
The Board of Directors and Stockholders of
Boston Properties, Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses (the "Statement") of 399 Park Avenue (the "Property") for
the year ended December 31, 2001. This Statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the current report on Form 8-K/A of Boston Properties, Inc. dated September
25, 2002) as described in Note 2 and is not intended to be a complete
presentation of the Property's revenue and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenue over certain operating expenses (as described in Note 2),
of the Property for the year ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
November 22, 2002
399 PARK AVENUE
COMBINED STATEMENTS OF REVENUE OVER CERTAIN OPERATING EXPENSES
(in thousands)
For the period from For the
January 1, 2002 through year ended
September 24, 2002 December 31, 2001
----------------------- ------------------
(Unaudited)
Revenue (Note 2):
Base rent $ 50,897 $ 37,035
Recoveries from tenants 1,361 1,688
----------------------- ------------------
52,258 38,723
----------------------- ------------------
Certain operating expenses (Note 2):
Repairs and maintenance 4,428 4,685
Janitorial and cleaning 2,775 3,519
Security 891 1,208
Utilities 2,639 3,944
General and administrative 391 1,111
Insurance 199 269
Real estate taxes 10,026 13,151
----------------------- ------------------
21,349 27,887
----------------------- ------------------
Excess of revenue over certain operating expenses $ 30,909 $ 10,836
======================= ==================
The accompanying notes are an integral part of these statements.
2
399 PARK AVENUE
NOTES TO THE COMBINED STATEMENTS OF REVENUE
OVER CERTAIN OPERATING EXPENSES
1. DESCRIPTION OF THE PROPERTY
The accompanying combined statements of revenue over certain operating
expenses (the "Statement") includes the operations of an approximately
1.7 million square foot Class A office tower known as 399 Park Avenue
(the "Property"), which was operated as two separate condominium units,
located in New York City, New York. On September 25, 2002, the Property
was acquired by Boston Properties, Inc. (the "Company") through its
subsidiary Boston Properties Limited Partnership from Citibank, N.A.
("Citibank"). Citibank occupies approximately 696,000 square feet of
space at the Property at September 30, 2002.
Total consideration for the acquisition was approximately $1.06 billion,
which was financed with a $1.0 billion unsecured bridge loan, and the
balance with cash.
2. BASIS OF ACCOUNTING
The accompanying Statement has been prepared on the accrual basis of
accounting but is not representative of the actual operations of the
Property for the periods shown. The Statement has been prepared in
accordance with Rule 3-14 of Regulation S-X of the Securities and
Exchange Commission for real estate properties acquired or to be
acquired. Accordingly, this Statement excludes revenue attributable to
the Citibank owner-occupied space in condominium unit two and certain
historical expenses not comparable to the operations of the Property
after acquisition such as certain ancillary income, amortization,
depreciation, interest, certain owner occupant expenses, corporate
expenses and certain other costs not directly related to the future
operations of the Property.
3. SIGNIFICANT ACCOUNTING POLICIES
RENTAL REVENUE
Rental revenue is recognized on a straight-line basis over the
terms of the related leases. The excess of recognized rentals over
amounts due pursuant to lease terms is recorded as accrued rent.
The impact of the straight-line rent adjustment increased revenue
by approximately $64,000 and $4,585,000 for the year ended
December 31, 2001 and for the period from January 1, 2002 through
September 24, 2002 (unaudited), respectively.
UNAUDITED INTERIM INFORMATION
The Statement for the period from January 1, 2002 through
September 24, 2002 is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such Statement
(in accordance with the Basis of Accounting as described in Note
2) have been included. The results of operations for the period
are not necessarily indicative of the Property's future results of
operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
4. DESCRIPTION OF LEASING ARRANGEMENTS
The office and retail space is leased to tenants under leases with terms
that vary in length. Certain leases contain reimbursement clauses and
renewal options. Minimum lease payments due under noncancelable operating
leases in effect as of September 25, 2002 (unaudited), for the remainder
of 2002 and annually thereafter are as follows:
Amount (1)
(in thousands)
--------------------
2002 (9/25/02 - 12/31/02) $ 27,040
2003 110,804
2004 111,070
2005 110,700
2006 105,839
2007 100,820
Thereafter 966,544
(1) Includes the addition of minimum lease payments that
Citibank will owe under terms of the lease agreement
signed concurrent with the Company's acquisition of the
Property.
As of September 25, 2002, two tenants occupied approximately 68% of the
leasable square feet of the Property.
3
BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
INTRODUCTION TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 2002
(Unaudited)
The accompanying unaudited Pro Forma Consolidated Balance Sheet of Boston
Properties, Inc. (the "Company") is presented as if the disposition of One and
Two Independence Square, which occurred subsequent to September 30, 2002, had
been consummated on September 30, 2002.
Such pro forma information is based on the historical consolidated balance sheet
of the Company as of that date, giving effect to the transactions described
above. This Pro Forma Consolidated financial information should be read in
conjunction with Form 10-Q for the nine months ended September 30, 2002
(unaudited). In management's opinion, all adjustments necessary to reflect the
above transaction have been made.
The following Pro Forma Consolidated Balance Sheet is not necessarily indicative
of what the actual financial position would have been assuming the above
transaction had been consummated on September 30, 2002 nor does it purport to
represent the future financial position of the Company.
4
BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS)
DISPOSITION OF
ONE AND TWO
SEPTEMBER 30, INDEPENDENCE PRO
2002 SQUARE FORMA
------------ ---------------- ------------
ASSETS
Real estate: $ 8,766,200 $ (145,674) (A) $ 8,620,526
Less: accumulated depreciation (836,418) 40,491 (A) (795,927)
------------ ---------------- ------------
Total real estate 7,929,782 (105,183) 7,824,599
Cash and cash equivalents 28,793 - 28,793
Escrows 28,200 (41) (B) 28,159
Tenant and other receivables, net 48,716 (3,002) (B) 45,714
Accrued rental income, net 156,818 (3,151) (B) 153,667
Deferred charges, net 148,435 (936) (C) 147,499
Prepaid expenses and other assets 38,752 - 38,752
Investments in unconsolidated joint ventures 101,819 - 101,819
------------ ---------------- ------------
Total assets $ 8,481,315 $ (112,313) $ 8,369,002
============ ================ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes and bonds payable $ 4,422,692 $ (189,129) (D) $ 4,233,563
Unsecured bridge loan 1,000,000 (144,859) (E) 855,141
Unsecured line of credit 44,000 - 44,000
Accounts payable and accrued expenses 69,236 (2,526) (B) 66,710
Dividends and distributions payable 81,190 - 81,190
Interest rate contracts 15,115 - 15,115
Accrued interest payable 18,265 (220) (B) 18,045
Other liabilities 70,292 (1,254) (B) 69,038
------------ ---------------- ------------
Total liabilities 5,720,790 (337,988) 5,382,802
------------ ---------------- ------------
Minority interests 804,229 39,944 (F) 844,173
------------ ---------------- ------------
Stockholders' equity:
Excess stock, $.01 par value, 150,000,000 shares
authorized, none issued or outstanding - - -
Common stock, $.01 par value, 250,000,000 shares
authorized, 95,352,102 issued and 95,273,202
outstanding 953 - 953
Additional paid-in capital 1,977,560 - 1,977,560
Dividends in excess of earnings (2,532) 185,731 (F) 183,199
Treasury common stock, at cost (2,722) - (2,722)
Unearned compensation (3,355) - (3,355)
Accumulated other comprehensive loss (13,608) - (13,608)
------------ ---------------- ------------
Total stockholders' equity 1,956,296 185,731 2,142,027
------------ ---------------- ------------
Total liabilities and stockholders' equity $ 8,481,315 $ (112,313) $ 8,369,002
============ ================ ============
The accompanying notes are an integral part of these financial statements.
5
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA
CONSOLIDATED BALANCE SHEET
September 30, 2002
(Unaudited)
(A) Represents the elimination of the net book value of One and Two
Independence Square at September 30, 2002.
(B) Represents the elimination of certain assets and liabilities of One and
Two Independence Square at September 30, 2002.
(C) Represents the elimination of the net book value of deferred leasing and
financing charges of One and Two Independence Square at September 30,
2002.
(D) Represents the repayment of the mortgage financing related to the
disposition of One and Two Independence Square.
(E) Represents the partial pay down of the unsecured bridge loan using the
excess proceeds from the sale of One and Two Independence Square after the
repayment of the mortgage financing.
(F) Represents the net increase in and rebalancing of Stockholders' Equity
and Minority Interests as a result of the sale of One and Two
Independence Square.
6
BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 2002 and
the year ended December 31, 2001
(Unaudited)
The accompanying unaudited Pro Forma Consolidated Statements of Operations for
the nine months ended September 30, 2002 and for the year ended December 31,
2001 are presented as if the acquisition on September 25, 2002 of 399 Park
Avenue and related unsecured bridge financing and the disposition on November
22, 2002 of One and Two Independence Square and related mortgage financing
repayment and unsecured bridge financing repayment had occurred on January 1,
2001.
These Pro Forma Consolidated Statements of Operations should be read in
conjunction with the historical consolidated financial statements and notes
thereto of the Company, reported on Form 10-K for the year ended December 31,
2001 and on Form 10-Q for the nine months ended September 30, 2002.
The unaudited Pro Forma Consolidated financial information prepared by Boston
Properties' management is not necessarily indicative of what the actual results
of operations would have been for the nine months ended September 30, 2002 or
for the year ended December 31, 2001, had the previously described transactions
actually occurred on January 1, 2001 and the effect thereof carried forward
through the nine month period ended September 30, 2002, nor do they purport to
present the future results of operations of the Company.
7
BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
NINE MONTHS DISPOSITION OF
ENDED ACQUISITION OF ONE AND TWO
SEPTEMBER 30, 399 PARK INDEPENDENCE PRO
2002 AVENUE SQUARE FORMA
------------- -------------- -------------- -----------
Revenue
Rental:
Base rent $ 713,447 $ 84,366 (A) $ (25,594) $ 772,219
Recoveries from tenants 87,080 1,361 (370) 88,071
Parking and other 37,610 - (52) 37,558
------------- -------------- -------------- -----------
Total rental revenue 838,137 85,727 (26,016) 897,848
Hotel revenue 20,007 - - 20,007
Development and management services 9,440 - - 9,440
Interest and other 4,804 - (10) 4,794
------------- -------------- -------------- -----------
Total revenue 872,388 85,727 (26,026) 932,089
------------- -------------- -------------- -----------
Expenses
Operating:
Rental 265,696 21,349 (6,427) 280,618
Hotel 13,524 - - 13,524
General and administrative 34,589 - - 34,589
Interest 199,539 24,965 (B) (13,489)(B) 211,015
Depreciation and amortization 132,274 13,276 (C) (2,896)(C) 142,654
Net derivative losses 10,413 - - 10,413
Loss on investments in securities 4,297 - - 4,297
------------- -------------- -------------- -----------
Total expenses 660,332 59,590 (22,812) 697,110
------------- -------------- -------------- -----------
Income before minority interests in property
partnerships, income from unconsolidated joint
ventures, minority interest in Operating
Partnership, gain on sale of land held for
development, preferred dividend and
discontinued operations 212,056 26,137 (3,214) 234,979
Minority interests in property partnerships 1,903 - - 1,903
Income from unconsolidated joint ventures 5,871 - - 5,871
------------- -------------- -------------- -----------
Income before minority interest in Operating
Partnership, gain on sale of land held for
development, preferred dividend and
discontinued operations 219,830 26,137 (3,214) 242,753
Minority interest in Operating Partnership (56,701) (4,739) (D) 583 (D) (60,857)
------------- -------------- -------------- -----------
Income before gain on sale of land held for
development, preferred dividend
and discontinued operations 163,129 21,398 (2,631) 181,896
Gain on sale of land held for development,
net of minority interest 3,644 - - 3,644
------------- -------------- -------------- -----------
Income before preferred dividend and
discontinued operations 166,773 21,398 (2,631) 185,540
Preferred dividend (3,412) - - (3,412)
------------- -------------- -------------- -----------
Income before discontinued operations $ 163,361 $ 21,398 $ (2,631) $ 182,128
============= ============== ============== ===========
Basic earnings per share: ------------- -----------
Income before discontinued operations $ 1.77 $ 1.97
============= ===========
Weighted average number of common
shares outstanding 92,413 92,413
============= ===========
Diluted earnings per share: ------------- -----------
Income before discontinued operations $ 1.74 $ 1.94
============= ===========
Weighted average number of common and common
equivalent shares outstanding 94,026 94,026
============= ===========
The accompanying notes are an integral part of these financial statements.
8
BOSTON PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
DISPOSITION OF
YEAR ENDED ACQUISITION OF ONE AND TWO
DECEMBER 31, 399 PARK INDEPENDENCE PRO
2001 AVENUE SQUARE FORMA
------------ -------------- ------------ ------------
Revenue
Rental:
Base rent $ 843,854 $ 113,466 (A) $ (34,145) $ 923,175
Recoveries from tenants 107,025 1,688 (692) 108,021
Parking and other 51,999 - - 51,999
------------ -------------- ------------ ------------
Total rental revenue 1,002,878 115,154 (34,837) 1,083,195
Development and management services 13,190 - - 13,190
Interest and other 12,183 - - 12,183
------------ -------------- ------------ ------------
Total revenue 1,028,251 115,154 (34,837) 1,108,568
------------ -------------- ------------ ------------
Expenses
Operating 311,371 27,887 (8,334) 330,924
General and administrative 38,312 - - 38,312
Interest 223,389 34,723 (B) (21,064)(B) 237,048
Depreciation and amortization 149,348 18,099 (C) (3,776)(C) 163,671
Net derivative losses 26,488 - - 26,488
Loss on investments in securities 6,500 - - 6,500
------------ -------------- ------------ ------------
Total expenses 755,408 80,709 (33,174) 802,943
------------ -------------- ------------ ------------
Income before minority interests in property
partnerships, income from unconsolidated
joint ventures, minority interest in
Operating Partnership, gain on sale of
real estate, preferred dividend, discontinued
operations and cumulative effect of a change
in accounting principle 272,843 34,445 (1,663) 305,625
Minority interests in property partnerships 1,085 - - 1,085
Income from unconsolidated joint ventures 4,186 - - 4,186
------------ -------------- ------------ ------------
Income before minority interest in Operating
Partnership, gain on sale of real estate,
preferred dividend, discontinued operations
and cumulative effect of a change in
accounting principle 278,114 34,445 (1,663) 310,896
Minority interest in Operating Partnership (74,832) (6,465) (D) 312 (D) (80,985)
------------ -------------- ------------ ------------
Income before gain on sale of real estate, preferred
dividend, discontinued operations and cumulative
effect of a change in accouinting principle 203,282 27,980 (1,351) 229,911
Gain on sale of real estate, net of minority interest 9,089 - - 9,089
------------ -------------- ------------ ------------
Income before preferred dividend,discontinued
operations and cumulative effect of a change
in accounting principle 212,371 27,980 (1,351) 239,000
Preferred dividend (6,592) - - (6,592)
------------ -------------- ------------ ------------
Income before discontinued operations and
cumulative effect of a change in
accounting principle $ 205,779 $ 27,980 $ (1,351) $ 232,408
============ ============== ============ ============
Basic earnings per share:
Income before discontinued operations and
cumulative effect of a change ------------ ------------
in accounting principle $ 2.28 $ 2.58
============ ============
Weighted average number of common shares
outstanding 90,002 90,002
============ ============
Diluted earnings per share:
Income before discontinued operations
and cumulative effect of a change ------------ ------------
in accounting principle $ 2.23 $ 2.52
============ ============
Weighted average number of common and common
equivalent shares outstanding 92,200 92,200
============ ============
The accompanying notes are an integral part of these financial statements.
9
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
The Pro Forma Consolidated Statements of Operations reflect the historical
results of operations of One and Two Independence Square and the historical
results of operations as reflected in the Combined Statements of Revenue Over
Certain Operating Expenses (the "Statement") of 399 Park Avenue, as adjusted for
base rent, interest expense and depreciation and amortization for the year ended
December 31, 2001 and the period from January 1, 2002 through September 24, 2002
(unaudited).
(A) Base Rent includes adjustments based on the pro forma acquisition date of
January 1, 2001 as follows:
Period from
January 1, 2002 Year ended
through December 31,
September 24, 2001
2002
----------------- ----------------
(dollars in thousands)
Base rent per the Statement $50,897 $37,035
Pro Forma Base Rent Adjustment (1) 33,469 76,431
----------------- ----------------
Pro Forma Base Rent $84,366 $113,466
================= ================
(1) Concurrent with the acquisition of 399 Park Avenue, the
Company entered into a leasing arrangement with Citibank. The amounts
above include an adjustment to base rent to reflect rental income
attributed to Citibank's occupied space in the pro forma periods. The
straight-line rent adjustment is based on the contractual lease terms
entered into by Citibank and the Company at the acquisition date of
399 Park Avenue for Citibank occupied space and is also based on the
terms related to space occupied by Citibank through November 2001 and
subsequently leased to another tenant. The amount above also includes
an adjustment to straight-line rent for pro forma purposes.
(B) Reflects the net increase in interest expense as a result of the unsecured
bridge financing obtained in connection with the acquisition of 399 Park
Avenue and the repayment of the mortgage financing and a partial repayment
of the unsecured bridge financing in conjunction with the disposition of
One and Two Independence Square. The unsecured bridge financing totaling
$1.0 billion requires payments of interest only at a current variable rate
of Eurodollar + 1.45% and matures in September 2003. The debt financing
repaid in connection with the disposition of Independence Square One and
Two consists of the following: a $75.0 million loan secured by One
Independence Square which bears interest at a variable rate of LIBOR +
1.60% (3.42% at September 30, 2002), a $114.1 million loan secured by Two
Independence Square which bears interest at an increasing fixed rate with a
current fixed rate of 8.5% and an effective interest rate of 8.09% and an
approximately $144.9 million pay down of the unsecured bridge loan with the
net proceeds from the disposition of One and Two Independence Square.
The interest rate of 3.27% and 3.33% used in the Pro Forma Consolidated
Statements of Operations is equal to the one-month LIBOR rate at September
30, 2002 and December 31, 2001, respectively, plus 145 basis points. The
effect on the Pro Forma Consolidated Statements of Operations for a 1/8%
change in rates is approximately $2.6 million and $3.5 million for the nine
months ended September 30, 2002 and the year ended December 31, 2001,
respectively.
(C) Reflects the pro forma depreciation and amortization expense for 399 Park
Avenue offset by the depreciation and amortization expense related to the
disposition of One and Two Independence Square. Depreciation for 399 Park
Avenue is based on a preliminary allocation of the purchase price to land,
10
building and other assets and is subject to change as additional
information is obtained. Depreciation expense is computed over an estimated
useful life of 40 years for the building.
(D) Reflects an adjustment for the minority interest in the Operating
Partnership's share of pro forma income before discontinued operations and
the cumulative effect of a change in accounting principle.
11